The U.S. government on Thursday launched an investigation into reported braking problems with Toyota's high-profile hybrid, the Prius, as the Japanese auto giant denied media reports in its home country that it will expand the Prius recall.

The news came on the same day that the company raised its sales outlook for the remainder of its fiscal year, reporting third-quarter profits that easily beat Wall Street estimates.

But solid earnings could not turn around yet another bad day for the automaker, renowned for more than two decades for its quality, reliability and customer satisfaction. All of those, however, have been called into question since the company was forced to recall 2.3 million vehicles last month to fix sticking gas pedals. Toyota said on Thursday the recalls underway could cost $2 billion.

The Transportation Department began its investigation into the Prius after receiving 124 complaints from owners of the 2010 model about "momentary loss of braking capability while traveling over an uneven road surface, pothole or bump," the agency said in a release. Four of the complaints involved alleged crashes.

The National Highway Traffic Safety Administration will lead the investigation.

Meanwhile, Toyota denied reports by the Nikkei news organization in Tokyo that the company is poised to recall 160,000 Priuses -- 100,000 in the United States -- related to the braking issue. The 2004-09 Prius models are part of a separate recall of 3.8 million vehicles launched in October to correct a problem with the driver's-side floor mat trapping the gas pedal. Toyota sold 139,682 Priuses in the United States in 2009.

"We have not received anything from [Toyota Motor Co.] about a recall" in the United States or Japan, Toyota spokesman John Hanson said. "That's not to say it won't happen, but I don't have any evidence of it."

"As of right now," a NHTSA spokeswoman said Thursday evening, "Toyota has not informed NHTSA of a recall on 2010 Prius hybrids."

LaHood, Toyota talk

In a statement on Thursday, Transportation Secretary Ray LaHood said he spoke late Wednesday night to Toyota President Akio Toyoda about safety issues.

Testifying before a Capitol Hill panel on Wednesday morning, LaHood told drivers of recalled Toyotas to stop driving them immediately and take them to a dealer. When the news was reported moments later, shares of Toyota stock plunged 7 percent, erasing $3 billion of company value.

LaHood later backed off his statement, saying that if Toyota owners have doubts about their cars, they should take them to a dealer. Shares of Toyota are down 20 percent since Jan. 19, just before the latest recall was announced.

The White House said Thursday it is satisfied with LaHood's performance during the Toyota crisis, despite his misstatement on Wednesday.

In a statement Thursday, Toyota said that it will fully cooperate with the probe, and it sought to offer an explanation for what drivers say they are feeling.

"Some customers have complained of inconsistent brake feel during slow and steady application of brakes on rough or slick road surfaces when the anti-lock brake system (ABS) is activated in an effort to maintain tire traction," the company said in a statement. "The system, in normal operation, engages and disengages rapidly (many times per second) as the control system senses and reacts to tire slippage. A running production change was introduced last month, improving the ABS system's response time, as well as the system's overall sensitivity to tire slippage."

Prius owners discussed the matter in online forums on Thursday. "Prius drivers are not panicking," wrote one. "Problem is real, but momentary, braking loss."

The Prius uses an innovative system known as "regenerative braking," which converts heat energy generated by braking into electrical energy, which is pumped back into the Prius's battery. This is why the vehicle gets such high gas mileage in stop-and-go driving.

But the interface can be "tricky," said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. There is sometimes a feeling of lag in braking when the Prius switches between its electrical and hydraulic braking systems.

Revenue soared 10.2 percent in a solid rebound from the third quarter of 2008, when the company booked a $1.8 billion loss.

Further, the company said, it expects to earn $900 million for the full year of 2010. It had been predicting a $2.2 billion loss. And Toyota raised its expectations for sales in 2010, from 7.03 million vehicles worldwide to 7.18 million.